1. Disability Rights Consortium Meeting 12/9/15 Equip for Equality… Advancing the Human & Civil Rights of People with Disabilities in Illinois

2. Where from ? REQUIRESSPECIALNEEDS TRUSTS

4. How to NOT lose SSI or Medicaid?

7. 1 st Version

8.  

9. INHERITANCE GIFT INSURANCEIRA401K Beneficiary’s own assets, UTMA, Child Support

16.   

18. WHAT ABOUT GIFTS ?

27. 1 st Party Special Needs Trust Medical Malpractice Malpractice SpecialNeedsTrust PersonalInjury Inheritances & Gifts NOT to 3 rd party SNT

28.  Only if not 65  Only by Parents, Grandparents, Courts & Guardians... NOT self…  SSA Position...  Courts often require...  Pay Back...

30. … child is mentally or physically disabled … child is mentally or physically disabled … an application for support MAY be made before or after the child has attained majority … an application for support MAY be made before or after the child has attained majority … to supplement SSI … to supplement SSI or offset? or offset?

40. COMMON ATTORNEY MISTAKES!

46. COMMON ATTORNEY MISTAKES! COMMON ATTORNEY MISTAKES!

49. COMMON ATTORNEY MISTAKES!

50. COMMON ATTORNEY MISTAKES! COMMON ATTORNEY MISTAKES!

51. COMMON ATTORNEY MISTAKES!

52. COMMON ATTORNEY MISTAKES! COMMON ATTORNEY MISTAKES!

62. Just like a 529… NOT!Just like a 529… NOT!

63. Federal Legislative History  First introduced in Congress in 2007  Re-introduced in each Congress thereafter  HR 647 – passed on 12/3/14 (404-17)  S 313 – passed on 12/16/14 (76-16)  Signed into law – 12/19/14 The Stephen Beck Jr., Achieving a Better Life Experience Act of 2014  ABLE ACT, but the technically correct name is “The Stephen Beck Jr., Achieving a Better Life Experience Act of 2014”… The Tax Increase Prevention Act of 2014  which actually is buried in “The Tax Increase Prevention Act of 2014”… P.L. 113-295  which actually is P.L. 113-295.

64. Illinois’ enacted…  15 ILCS 505/16.6  P.A. 99-145 1/1/16sort of  Effective 1/1/16 “sort of” NOT after the “Final Treasury Regulations” are published!  The State will NOT allow accounts until after the “Final Treasury Regulations” are published!

66. Who Qualifies?

67. Qualified Disability Expenses – education, – housing, – transportation, – employment training and support, – assistive technology and personal support services, – health, – prevention and wellness, – financial management and administrative services, – legal fees, – expenses for oversight and monitoring, – funeral and burial expenses.

68.  Per Proposed Treasury Regulations – List of permitted allowable expenses are not exhaustive and should additionally include basic living expenses – Disability related expenses should be: construed broadly;construed broadly; may be attributed to the designated beneficiary’s health, independence and quality of life;may be attributed to the designated beneficiary’s health, independence and quality of life; should not be limited to items for which there is a medical necessity;should not be limited to items for which there is a medical necessity; and may include expenses which could benefit individuals in addition to benefiting the designated beneficiary… so not sole benefit as a d4…and may include expenses which could benefit individuals in addition to benefiting the designated beneficiary… so not sole benefit as a d4… Qualified Disability Expenses

69. What if beneficiary lacks capacity?

70. Illinois’ ABLE Act 15 ILCS 505/16.6 (P.A. 99-145, eff. 1-1-16) Sec. 16.6(a): … "Designated representative" … The State Treasurer shall recognize a person as a designated representative without appointment by a court in the following order of priority: (1) The account owner's plenary guardian of the estate, or the account owner's limited guardian of financial or contractual matters. Any guardian acting in this capacity shall not be required to seek court approval for any ABLE qualified distributions. (2) The agent named by the account owner in a property power of attorney recognized as a statutory short form power of attorney for property. (3) Such individual or entity that the account owner so designates in writing, in a manner to be established by the State Treasurer. (4) Such other individual or entity designated by the State Treasurer pursuant to its rules.

71. Can a Traditional 529 Plan be Rolled into an ABLE Account? The Treasury Department and the IRS have been asked whether a qualified tuition account under section 529 may be rolled into an ABLE account for the same designated beneficiary free of tax. Because such a distribution to the ABLE account would not constitute a qualified higher education expense under section 529, the Treasury Department and the IRS do not believe they have the authority to allow such a transfer on a tax-free basis.

72. Food/Shelter under Federal Able…? Food/Shelter under Federal Able…?  One question the Proposed Regulations did NOT answer is whether utilization of expenses for food and shelter will cause the 1/3 reduction in SSI.  Currently under SSI – payments from a trust for housing from a family member or a trust cause a reduction in benefits by $264.66 72 SEC. 4. TREATMENT OF ABLE ACCOUNTS UNDER CERTAIN FEDERAL PROGRAMS. except that, in the case of the supplemental security income program under title XVI of the Social Security Act, a distribution for housing expenses (within the meaning of such subsection) shall not be so disregarded, and in the case of such program, only the 1st $100,000 of the amount (including such earnings) in such ABLE account shall be so disregarded (a) Account Funds Disregarded for Purposes of Certain Other Means-Tested Federal Programs.--Notwithstanding any other provision of Federal law that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such provision to be provided to or for the benefit of such individual, any amount (including earnings thereon) in the ABLE account (within the meaning of section 529A of the Internal Revenue Code of 1986) of such individual, and any distribution for qualified disability expenses (as defined in subsection (e)(5) of such section) shall be disregarded for such purpose with respect to any period during which such individual maintains, makes contributions to, or receives distributions from such ABLE account, except that, in the case of the supplemental security income program under title XVI of the Social Security Act, a distribution for housing expenses (within the meaning of such subsection) shall not be so disregarded, and in the case of such program, only the 1st $100,000 of the amount (including such earnings) in such ABLE account shall be so disregarded.

73. Funeral The Proposed Regulations also don’t answer questions regarding funerals:  Can an ABLE Account be used for funeral expenses (not pre-paid which would be a Qualified Expense) after the death of the beneficiary prior to pay back?  That would be helpful since a d4A and d4C cannot.

74. Illinois’ ABLE Act 15 ILCS 505/16.6 (P.A. 99-145, eff. 1-1-16) Sec. 16.6(b):  The State Treasurer shall not accept contributions for ABLE accounts under this Section until the Internal Revenue Service has issued its final regulations concerning ABLE accounts.  The State Treasurer shall establish fees to be imposed on participants to recover the costs of administration, recordkeeping, and investment management. The State Treasurer must use his or her best efforts to keep these fees as low as possible, consistent with efficient administration.

75. ABLE Act 11/20 …to reduce the administrative burden on program administrators. Below are excerpts of the relevant sections: beneficiary/owner will be responsible 1.The beneficiary/owner will be responsible for documenting that ABLE funds are spent for qualified disability expenses and the program will not have to verify how funds are spent. 2.ABLE programs will not have to obtain the TIN for each contributor, but programs must be able to prevent excess contributions and have the authority to obtain the TIN for the contributor who puts the account over the applicable limits. beneficiary/owner may self- report as meeting the disability criteria under penalty of perjury, and must be able to produce the necessary certification if requested 3.The beneficiary/owner may self- report as meeting the disability criteria under penalty of perjury, and must be able to produce the necessary certification if requested.

76. Illinois’ ABLE Act 15 ILCS 505/16.6 (P.A. 99-145, eff. 1-1-16) Sec. 16.6(e): The State Treasurer may adopt rules to carry out the purposes of this Section. The State Treasurer may adopt rules to carry out the purposes of this Section. The State Treasurer shall further have the power to issue peremptory rules necessary to ensure that ABLE accounts meet all of the requirements for a qualified state ABLE program under Section 529A of the Internal Revenue Code and any regulations issued by the Internal Revenue Service. The State Treasurer shall further have the power to issue peremptory rules necessary to ensure that ABLE accounts meet all of the requirements for a qualified state ABLE program under Section 529A of the Internal Revenue Code and any regulations issued by the Internal Revenue Service.

77. 77

78. Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above.

79. Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above.

80. 80

81. Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above.

82. Among the many issues with ABLE (H 3423 & S 1872) are: (1) ABLE is much more limited on how you can spend the money than a traditional 1st party or 3rd party special needs trust (example, no vacations under ABLE); (2) reporting requirements to the federal government unlike a 3rd party special needs trust, and if no guardianship and not a minor, much more reporting requirements than a 1st party special needs trust; (3) a pay back (reimbursement) to the State when the beneficiary dies, for all that the State(s) paid, unlike a 3rd party special needs trust where the remainder stays with the family; (4) if there is a guardianship, then court approval is required to establish the ABLE Account in Illinois, and in many counties (all collar counties), court approval for expenditures and required notice to the State of all expenditures, subject to State challenge, and possibly have to post a surety bond; (5) If ABLE Accounts for beneficiary, in total, exceed $100,000, then the beneficiary will lose SSI, and in the way it is currently worded, in some states, such as Illinois, where Medicaid is not automatically tied to SSI (in most states it is, but NOT Illinois), loss of Medicaid, including Waiver programs; (6) you can’t move custodial accounts (UTMAs) to an ABLE Account if there is a Guardianship or the beneficiary is a minor, without court approval. I could go on, but these are just some of the issues. When does it make sense? For small litigation settlements and/or when the beneficiary is putting their own money in and no one cares that the other children or the beneficiary’s children will not see anything, get anything when the beneficiary dies. It also would be beneficial if the beneficiary is on SSDI and Medicare and not on SSI or Medicaid. The real benefit is income tax free growth, but investing in federal income tax free municipal bonds or municipal bond funds, or equities producing little income where you only will be subject to capital gain rates, maybe a better option. Also remember that Pooled Trusts, like Life’s Plan and the Illinois Disability Association are also alternatives that should be considered without the problems outlined above.

84. Where ABLE Might Fit… continued  Small amounts of beneficiary’s own money  Control for competent beneficiaries  Accumulation of wages over time  Transfer of UTMA accounts at 21 (18) to qualify for SSI and/or Medicaid  Save for purchase of home or car or wedding expenses  65 & can’t use d4A or d4C or no parent/grandparent/guardian for d4A

85. Final ABLE thoughts:  The ABLE Act is a new tool – and in limited situations can be an easy way to shelter assets and still remain qualified for SSI & Medicaid.  ABLE in most cases is not a substitute for a special needs trust.  There is a great need for broad education about all the different options for setting aside assets for persons with disabilities to ensure quality of life.